Correlation Between KB HOME and Mastercard

Can any of the company-specific risk be diversified away by investing in both KB HOME and Mastercard at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining KB HOME and Mastercard into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between KB HOME and Mastercard, you can compare the effects of market volatilities on KB HOME and Mastercard and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in KB HOME with a short position of Mastercard. Check out your portfolio center. Please also check ongoing floating volatility patterns of KB HOME and Mastercard.

Diversification Opportunities for KB HOME and Mastercard

-0.26

Correlation Coefficient

KB HOME  Mastercard

Very good diversification

The 3 months correlation between KBH and Mastercard is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding KB HOME and Mastercard in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mastercard and KB HOME is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on KB HOME are associated (or correlated) with Mastercard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mastercard has no effect on the direction of KB HOME i.e., KB HOME and Mastercard go up and down completely randomly.

Pair Corralation between KB HOME and Mastercard

Assuming the 90 days trading horizon KB HOME is expected to under-perform the Mastercard. In addition to that, KB HOME is 1.93 times more volatile than Mastercard. It trades about -0.71 of its total potential returns per unit of risk. Mastercard is currently generating about 0.1 per unit of volatility. If you would invest  50,140  in Mastercard on October 4, 2024 and sell it today you would earn a total of  810.00  from holding Mastercard or generate 1.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

KB HOME  vs.  Mastercard

KB HOME

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KB HOME has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Mastercard

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Mastercard reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KB HOME and Mastercard

The main advantage of trading using opposite KB HOME and Mastercard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KB HOME position performs unexpectedly, Mastercard can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Mastercard will offset losses from the drop in Mastercard's long position.

The idea behind KB HOME and Mastercard pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the FinTech Suite module to use AI to screen and filter profitable investment opportunities.